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BANCROFT  LIBRARY 

THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 


WALTER  WADSWORTH   BRADLEY 

1878-1950 

Walter  W.  Bradley  was  born  in  San  Jose  and 
received  the  degrees  of  B.S.  and  E.M.  from 
the  University  of  California.  From  1912  to 
1946  he  was  associated  with  the  California 
Division  of  Mines,  serving  as  State  Mineral- 
ogist for  the  last  eighteen  years  of  that  period. 
His  published  works  relate  to  mining,  proc- 
essing, and  geology.  This  book  is  from  his 
private  collection,  presented  to  the  Bancroft 
Library  by  Mrs.  Alice  Roberts  Bradley. 


9f J&>t  '^^ 


CONSERVATION 


AN  ADDRESS  BY 

M.    L.    RE  QUA 

Vice-President  of  the  Sinclair  Consolidated  Oil  Corporation, 

before  the  American  Petroleum    Institute, 

Washington,  D.  C. 

November  19,  1920 


With  the  Compliments  of  the 

UNION    PETROLEUM   COMPANY 

PHILADELPHIA 

UNin^'  PETROLEUM  COMPANY 

OF  CALIFORNIA 


BANCROFT 
LIBRARY 


CONSERVATION 

An  Address  by 

M.  L.  REQUA 

Vice   President   of  the  Sinclair  Consolidated  Oil  Corporation,  before  the 

American  Petroleum  Institute,  Washington,  Z>.  C, 

November,  19,  1920 

IT  WAS  with  considerable  pleasure,  and  much  trepidation,  that 
I  accepted  the  call  of  the  president  of  the  Institute  to  address  you 
upon  the  subject  of  CONSERVATION.  Pleasure,  because  it 
would  afford  me  an  opportunity  to  face  again  an  audience  of  oil  men 
and  renew  old  acquaintances  once  more  while  perhaps  presenting  to 
them  some  thoughts  that  may  be  worthy  of  consideration;  trepidation, 
because  of  my  conviction  that  I  should  fall  far  short  of  doing  justice 
to  a  subject  which  must  with  each  succeeding  year  become  more  and 
more  of  paramount  importance. 

In  the  future,  when  most  of  the  great  problems  of  today  are  solved, 
our  descendants  will  find  before  them  in  ever  increasing  importance  the 
vital  question  of  Conservation;  and  in  the  far  distance,  when  the  world 
is  dying  and  the  last  human  beings  are  eking  out  a  miserable  existence 
fighting  for  the  last  grains  of  wheat  or  drops  of  water,  it  is  Conservation 
that  will  be  uppermost  in  their  minds. 

Today  we  are  blest  with  fertile  fields  where  the  yellowing  grain 
ripens  beneath  the  rays  of  the  summer  sun;  where  the  green  meadows 
furnish  sustenance  to  countless  herds;  where  the  locomotive,  the  auto- 
mobile, and  the  airplane  transport  us  from  place  to  place  at  speeds 
undreamed  of  by  our  ancestors;  where  modern  civilization  in  all  its 
complexity  of  industrial  and  social  relations  pulsates  in  rhythmic  har- 
mony with  the  demands  of  the  peoples  of  the  world;  where  modern  in- 
dustry, affording  livelihood  and  vocation  to  millions  of  people,  is  made 
possible  only  by  continuity  in  the  supply  of  raw  materials.  But  we 
have  witnessed  another  picture  during  the  past  six  years.  We  have 
seen  the  ghastly  spectacle  of  a  world  from  which  was  banished  con- 
servation of  human  life  and  of  all  forms  of  property;  and  we  want  no 
more  of  it.  In  Russia  we  have  witnessed  a  debacle  so  profound  that 
civilization  as  we  know  it  has  fallen,  and  had  the  World  War  continued 
another  year  all  Europe  might  well  have  been  involved  in  the  same  a^^ul 


downfall.  If  it  had  been  so,  it  would  have  been  because  of  the  wreck 
of  all  forms  of  Conservation.  We  prize  life  and  conserve  it;  we  believe 
in  the  right  of  property  and  its  conservation,  and  because  we  do  believe 
in  the  conservation  of  life  and  property  we  want  to  return  to  normal 
ways.  We  want  to  avail  ourselves  of  the  unbounded  opportunities 
that  beckon  us  ever  forward.  But,  keeping  in  mind  the  lessons  of  the 
past  six  years,  we  would  realize  that  if  we  are  to  enjoy  in  fullest  measure 
those  opportunities  we  must  conserve  our  resources  rather  than  waste 
them  with  prodigal  hand. 

We  are  beginning  to  realize  that  we  cannot  with  impunity  draw 
indefinitely  and  wastefully  upon  our  natural  resources;  we  cannot  shut 
our  eyes  to  the  evolution  that  is  continuous  from  generation  to  genera- 
tion, or  as  individuals  burn  the  candle  at  both  ends,  without  sooner  or 
later  being  confronted  with  a  day  of  reckoning.  The  seriousness — or 
perhaps  the  hopelessness — of  that  day  is  entirely  dependent  upon  the 
speed  with  which  each  individual  in  the  nation  is  made  familiar  with  the 
facts  and  is  educated  through  proper  and  wise  efforts  to  an  intelligent 
comprehension  of  the  fundamentals  involved.  Whether  this  education 
will  assure  upon  the  part  of  the  public  intelligent  and  constructive 
demands,  in  place  of  those  ill-considered  and  unwise  in  character  which 
have  been  so  much  in  evidence  in  the  past,  depends  in  large  part  upon 
industry  itself. 

The  nation  does  not  stand  still,  either  in  population  or  in  industrial 
growth;  and  with  its  growth  there  arise  contemporaneously  problems 
of  one  kind  and  another  that  have  been  or  will  be  settled  either  intelli- 
gently and  satisfactorily  through  anticipation  by  industry  and  at  times 
by  co-operation  with  Government,  or  bungled  by  legislators  largely 
lacking  in  the  necessary  knowledge  prerequisite  to  intelligent  action. 
Many — the  largest  majority,  in  fact — of  those  problems  can,  I  think, 
be  settled  with  little  or  no  governmental  legislation;  but  should  that 
eventually  become  necessary,  in  some  cases,  honest  presentation  and 
co-operation  with  Government  must  lead  to  results  far  more  satisfac- 
tory and  intelligent  than  those  produced  by  some  of  the  methods 
practiced  in  the  past,  from  which  have  resulted  conditions  that,  to 
state  it  mildly,  are  on  a  level  with  sabotage  and  syndicalism  or  the 
activities  recently  exposed  in  the  building  trades  investigation  con- 
ducted in  New  York  City.  Those  methods  never  have  and  never  will 
work  satisfactorily,  over  any  considerable  period  of  time,  and  the  sooner 
certain  factions  in  industry  realize  that  "Honesty  is  the  best  policy" 
and  that  the  "Golden  Rule"  is  something  more  than  a  mere  academic 
theory,  the  better  off  a  lot  of  people — both  Government  employees  and 
private  citizens — are  going  to  be. 


Government,  on  its  part,  has  an  obligation  to  perform,  that  may  be 
summed  up  in  the  words  of  Theodore  Roosevelt,  who  said:  *'This  nation 
must  get  out  of  the  business  of  politics  and  into  business  of  government." 
We  must  demand  of  our  public  oflScials  that  same  high  type  of  citizen- 
ship which  we  demand  of  our  individual  citizens;  the  welfare  of  the 
individual  and  the  party  must  give  way  to  the  public  welfare;  and  if 
both  Government  and  Industry  will  approach  in  this  spirit  the  problems 
that  are  with  us  today  and  that  are  to  arise  in  the  future,  satisfactory 
solution  is  a  foregone  conclusion. 

In  handling  our  great  national  problems  of  Conservation  we  shall, 
of  course,  make  little  or  no  headway  unless  and  until  the  weight  of 
public  opinion  is  thrown  affirmatively  into  the  balance  in  favor  of  the 
proposal,  whatever  it  may  be.  And  in  turn  it  may  be  truthfully  said 
that  public  opinion  can  be  aroused  only  by  proper  presentation  of  a 
meritorious  cause.  Given  such  a  cause — and  I  believe  we  have  it  in 
Conservation  of  Petroleum — and  given  the  necessary  machinery  for 
dissemination  of  the  truth,  I,  personally,  have  no  fear  but  that  our 
American  people  will  find  the  correct  answer. 

But  in  order  that  the  people  may  be  made  cognizant  of  the  facts, 
it  is  necessary  that  someone  or  some  organization  gather  those  facts 
and  give  them  the  widest  possible  circulation.  If  we  are  to  achieve 
success,  it  goes  without  saying,  I  think,  that  the  facts  must  be  truthfully 
presented  and  that  mutual  confidence  must  be  established,  as  between 
the  public  on  the  one  hand  and  the  purveyor  of  facts  upon  the  other. 
Anything  short  of  this  will  render  nugatory  any  effort,  regardless  of 
the  time  and  energy  that  may  be  expended. 

These  facts  must  be  statements  of  truth,  presented  in  the  form  of 
cold  unemotional  statistics  and  precise  statements  that  speak  for  them* 
selves  and  that  need  no  specialist  or  expert  to  construe  them.  And 
unless  the  case  can  be  successfully  presented  in  this  manner,  to  the  total 
elimination  of  the  sophistry  of  the  trained  orator,  I  will  agree  that  the 
case  must  go  unproved. 

For  work  of  this  kind  I  know  of  no  instrument  so  well  fitted  for  the 
task  as  the  American  Petroleum  Institute.  I  believe  it  is  officered  by 
men  of  high  integrity,  animated  by  a  spirit  of  service  that  comprehends 
equal  justice  alike  to  its  members  and  the  public;  and  if  this  is  so,  it 
is  able  to  render  invaluable  aid  to  the  industry  which  needs  and  must 
have  above  everything  else  the  respect  and  confidence  of  the  public. 
Given  that  respect  and  confidence.  Government  supervision,  control, 
or  regulation  becomes  purely  an  academic  discussion  of  an  entirely 
unlikely  event. 

You  all  know,  I  think,  my  views  upon  the  subject  of  co-operation 
and  my  belief  that  without  industrial  co-operation  within  the  industry. 


and  between  the  industry  and  Government,  we  shall  in  the  future  fall 
far  short  of  giving  to  the  public  the  high  type  of  service  which  has  been 
so  markedly  characteristic  of  the  activities  of  the  petroleum  industry 
in  the  past.  And  should  we  fail  in  this  service,  we  invite  public  criticism 
that  will  be  quickly  translated  into  Government  investigation  and  har- 
rassment,  which  in  turn  spells  lessened  efficiency.  From  the  purely 
selfish  standpoint  of  self-preservation,  therefore,  we  must  co-operate. 
And  it  is  also  true  that  without  co-operation  there  can  be  no  conservation. 

Let  us,  then,  link  these  two  words  together  as  the  slogan  of  the 
petroleum  industry:  Conservation  and  Co-operation — wise  and  bene- 
ficial alike  to  the  public  and  the  industry.  I  can  conceive  no  valid 
excuse,  should  we  fail  in  the  effort  to  translate  these  two  words  into 
constructive  and  effective  action. 

Unfortunately,  Conservation,  in  the  minds  of  many,  has  become 
confused  with  hoarding — the  withdrawal  from  immediate  use;  in  short, 
sabotage  as  related  to  raw  materials.  For  years  the  coal  of  Alaska 
has  remained  unmined,  in  large  part  because  of  regulations  impossible 
of  performance  when  balanced  against  commercial  necessity  and  a  profit 
justifying  the  investment.  The  water-powers  of  the  West  have  in  the 
past  failed  to  receive  adequate  development  and  utilization  because  of 
similar  folly  in  promulgation  of  regulations;  and  it  is  only  after  ten  years 
that  any  solution  of  the  leasing  of  withdrawal  petroleum  lands  has  been 
forthcoming,  and  even  after  these  years  of  weary  waiting,  that  measure, 
as  I  view  it,  leaves  much  to  be  desired. 

It  is  not  this  type  of  conservation  I  have  in  mind,  but  rather  the 
type  so  well  defined  by  S.  S.  Wyer,  who  was,  during  the  war  period, 
connected  with  the  Oil  Division  of  the  United  States  Fuel  Adminis- 
tration.    He  says: 

"True  conservation  is  not  hoarding,  but  the  wise  use  of  natural 
resources;  and  it  implies  not  merely  the  preserving  in  unimpaired  effi- 
ciency, but  also  a  wise  and  equitable  exhaustion  with  a  maximum 
efficiency  and  a  minimum  waste.  *  *  *  Conservation,  therefore, 
demands  intensive  rather  than  extensive  use;  takes  cognizance  of 
equitable  distribution;  aims  to  bring  about  social  justice,  and  means 
the  greatest  good  to  the  greatest  number — and  that  for  the  longest  time." 

That  we  need  Conservation  seems  so  self-evident  as  to  require  little 
argument  save  to  differentiate  as  between  the  genuine  article  and  the 
impractical  and  bogus  article  foisted  upon  the  West  by  Eastern  theorists. 
The  late  J.  A.  Holmes,  formerly  Director  of  the  Bureau  of  Mines,  has 
well  said  that 

"*  *  *  both  in  legislation  and  in  public  opinion  we  must  main- 
tain, as  essential,  a  rational  basis  for  the  conservation  movement,  which 
recognizes  (1)  the  rights  of  the  individual  to  property  and  to  reasonable 


profits  in  his  investments  and  his  labor,  and  (2)  the  paramount  rights 
respectively  of  the  community,  of  the  state,  and  of  the  nation  to  safe- 
guard the  future  as  well  as  the  present  welfare  of  its  citizens." 

So,  while  it  is  important  that  we  practice  conservation — that  is, 
use  our  heritage  wisely  and  well — we  can  prove  that,  most  of  all,  its 
highest  development  and  practice  should  be,  must  be,  by  those  who 
win  the  minerals  from  the  earth's  crust.  In  many  a  lonely  canyon, 
upon  many  a  rugged  mountain-side  and  desert  waste  throughout  the 
West,  stand  idle  mining  plants  once  the  scene  of  feverish  activities, 
now  peopled  only  with  ghosts — abandoned  and  decaying;  forlorn  senti- 
nels upon  the  highway  of  progress;  marking  the  passing  of  some  portion 
of  our  natural  resources;  grim  reminders  of  the  fate  that  in  time  will  be 
the  destiny  of  all  our  mineral  reserves.  Because  the  outcrops  of  those 
deposits  were  upon  the  surface — easily  found  and  easily  exhausted — 
they  afford  striking  example  of  the  truth  of  the  statement  that  our 
natural  resources  are  far  from  limitless. 

Our  national  and  individual  life  is  dependent  upon  the  products 
won  from  the  soil  by  the  husbandman,  hewn  from  the  forests  by  the 
axeman,  or  torn  from  reluctant  Mother  Earth  by  the  driller  or  the  miner. 
By  proper  conservation  and  by  renewal  of  soil  ingredients  the  products 
of  the  farm  may  be  reproduced  indefinitely.  Reforestation  may  renew 
the  trees  of  our  forests,  that  are  now  being  exhausted  four  times  faster 
than  they  grow;  but  the  minerals  of  the  earth,  once  removed,  are  gone 
for  all  eternity.  Turn,  therefore,  where  you  will,  you  face  the  problem 
of  Conservation  in  some  form — whether  in  the  field,  the  forest,  or  the 
mine;  but  most  acutely  of  all  in  the  mine,  where  we  are  dealing  with  a 
wasting  asset  that,  once  exploited,  leaves  as  a  heritage  for  future  gene- 
rations, only  scars  and  gashes  upon  the  surface  of  the  earth. 

Much  has  been  said  in  the  past  in  criticism  of  the  extravagant  and 
wasteful  manner  in  which  America  has  developed  and  exploited  her 
natural  resources.  It  was  inevitable,  I  think,  that  it  should  have  been 
so.  And  yet,  was  it  really  waste?  The  very  profusion  and  seeming 
limitlessness  of  our  resources  made  for  extravagant  development  and 
consumption.  Why  should  we  conserve.,  when  products  were  a  drug 
on  the  market  and  the  available  supply  apparently  without  limit? 
There  was  apparently  neither  reason  nor  necessity.  Nor  must  we  forget 
that  the  very  speed  with  which  we  grew  was  made  possible  only  by 
ignoring  waste  and  making  prodigal  use  of  what  we  had  at  hand. 

The  technology  of  all  industry  has  grown  with  the  industry  itself; 
methods  of  yesterday  are  obsolete  today,  and  those  of  today  will  be 
looked  upon  tomorrow  with  amazement  because  of  their  crudity. 
It  has  been  so  in  the  Petroleum  industry.  The  standard  or  rotary  rig  of 
today,  the  methods  of  transportation,  refining,  and  distributing  are  the 


outgrowth  of  years  of  effort  in  perfecting  the  tools  of  the  trade;  and  the 
methods  which  now  seem  wasteful  or  inefficient  were  when  first  used 
the  acme  of  perfection. 

I  have  no  quarrel  with  those  venturesome  spirits  who  from  Penn- 
sylvania to  California  gambled  with  Fortune  in  an  effort  to  "strike  oil." 
They  had  the  spirit  to  do  and  to  dare;  the  courage  of  their  convictions 
in  attempting  to  wring  petroleum  from  the  unwilling  earth;  and  to  them 
all  credit  is  due  for  the  pioneer  activities  that  in  their  results  are  little 
short  of  miraculous.  They  were  of  the  bone  and  sinew  that  builded 
the  nation,  and  because  they  have  passed  the  nation  is  the  poorer. 
They  labored  under  enormous  handicap,  doing  the  best  they  knew  how, 
but,  somehow,  some  way,  somewhere,  producing  the  material  that  over 
the  last  sixty  years  has,  with  electricity,  most  profoundly  effected  the 
growth  of  modern  civilization. 

The  growth  of  Industry  may  be  divided  into  three  epochs:  The 
period  of  pioneering,  the  period  of  rapid  development,  and  the  period 
of  maturity.  The  pioneer  period  was  marked  by  dearth  of  capital  and 
distribution  facilities  and  surplus  of  natural  resources.  Under  these 
conditions  resources  were  necessarily  exploited  inefficiently;  the  main 
consideration  was  to  get  out  the  product  and  market  it  as  best  might  be. 
There  was  in  those  days  a  strong  justification  for  resource  waste;  it 
was  the  only  answer  to  the  problem. 

I  have  little  patience  with  the  Europeans  who  attempt  to  criticise 
our  pioneer  activities,  and  attempt  to  compare  our  conditions  with 
their  own.  There  is  no  comparison  possible.  There — an  old  civilization, 
a  settled  and  dense  population,  and  short  distance  to  travel  from  place 
to  place.  Here — a  continent  to  be  conquered  and  peopled,  a  civiliza- 
tion to  be  created,  vast  distances  to  be  overcome;  in  short,  a  new  world 
to  be  fashioned  for  the  habitation  of  man.  And  it  was  done.  And  if, 
in  the  doing,  those  who  pioneered  the  way  fell  short  of  discharging  full 
obligation — as  conceived  today  by  urban  dwellers  in  the  East  or  in 
Europe — those  of  us  who  were  ourselves  a  part  of  it,  or  who  are  the 
descendants  of  those  who  did  fashion  the  nation,  may  rest  content  in  the 
knowledge  that  there  has  been  written  into  the  pages  of  history  an 
achievement  that  needs  neither  apology  nor  defense. 

The  period  of  development  has  followed  the  day  of  the  pioneer. 
Capital  acquired  through  hasty  and  makeshift  extraction  of  our  natural 
resources  has  been  used  in  creating  yet  other  activities ;  population 
attracted  by  the  prospect  of  rapid  acquirement  of  wealth  has  invaded 
the  wilderness,  crossed  the  mountain  ranges  and  deserts,  and  gazed  upon 
the  waters  of  the  Pacific,  and  now  rolls  back  upon  itself  to  populate  the 
few  remaining  vacant  spots  in  the  great  inter-mountain  regions  of  the 
West. 


We  have  passed  two  of  the  great  periods  of  our  growth,  and  we  are 
now  face  to  face  with  the  third  and  last  period,  wherein  it  becomes 
necessary  to  scrutinize  not  only  our  resources,  but  also  our  methods  of 
utilization,  to  the  end  that  the  maximum  use  may  be  obtained.  Depre- 
ciation, depletion,  amortization,  are  no  longer  academic  terms,  but  are 
very  real  and  practical  issues.  And  with  it  all,  of  course,  is  the  need  to 
consider  how  best  we  may  conserve  our  reserves  which  are  to  furnish 
the  justification  for  the  enormous  investment  representing  our  manu- 
facturing and  distributing  facilities  that  function  satisfactorily  only 
through  the  continuous  flow  of  raw  materials. 

We  have  rounded  the  turn  that  marks  the  division  between  callow 
youth  and  mature  age;  we  have  created  our  capital,  attracted  our  labor, 
and  now  the  need  is  for  co-ordinated  development  and  rational  con- 
servation, which  is  the  very  essence  of  practical  effort  in  that  it  en- 
deavors to  prolong  production  and  increase  quantity  without  interference 
with  consumption.  In  its  broadest  sense,  the  wise  and  full  utilization 
of  our  natural  resources,  in  the  future,  is  a  very  vital  as  well  as  a  very 
practical  issue.  The  past  is  buried  with  the  ages — water  over  the  dam 
turns  no  mill  wheels;  and  we  have  therefore  to  do  only  with  the  future; 
and  in  so  doing  it  is  well  that  we  must  keep  our  eyes  looking  ever  for- 
ward, lest  we  confuse  the  problems  of  past  generations  with  those 
vastly  different  ones  we  shall  have  to  solve  in  the  future.  What  has 
been,  has  been;  but  that  is  neither  reason  nor  excuse  for  assuming  that 
we  can  successfully  apply  in  the  future  the  methods  that  have  been  used 
in  the  past. 

Having  sketched  for  you,  in  rough  outline,  some  of  the  fundamentals 
underlying  the  Problem  of  Conservation,  I  shall  address  myself  more 
particularly  to  the  Problem  of  Conservation  as  related  to  the  present 
and  future  of  the  petroleum  industry.  I  shall  not  attempt  to  do  more 
than  point  out  some  of  the  unsatisfactory  conditions  that  can  be, 
I  think,  successfully  attacked  by  the  industry.  I  appeal  more  in  the 
questioning  mood,  asking,  is  it  not  possible  for  the  industry  through 
co-operation,  to  find  ways  and  means  to  bring  about  more  satisfactory 
conditions? 

Criticism  is  an  avocation  indulged  in  with  great  glee  by  many 
theorists  who  attempt,  with  all  the  cock-sureness  of  ignorance,  to 
dictate  methods  and  policies.  I  shall  not,  I  hope,  be  guilty  of  such 
an  attitude;  but  there  are  questions  to  be  asked  of  the  industry  that 
deserve  a  respectful  hearing  and  an  answer.  That  answer  cannot  be 
made  lightly  nor  unthinkingly,  but  rather  only  after  deep  reflection 
and  debate.  To  answer  the  questions  satisfactorily  will  require  extended 
co-operative  investigation. 


For  years  the  Bureau  of  Mines  has  been  studying  the  problem  of 
increasing  the  recovery  of  petroleum  from  oil  sands  as  best  it  could 
with  the  appropriation  available,  and  has  expressed  the  opinion  that 
only  10%  to  20%  of  the  oil  underground  is  being  won.  Is  it  commer- 
cially possible  to  recover  greater  quantities,  and  how?  What  is  the 
industry  doing,  co-operatively  or  individually,  to  recover  more  oil  from 
the  oil-bearing  formations?  Is  there  any  co-operative  study  being 
given  to  this  problem? 

Do  you  know  what  California  has  done?  Do  you  know  the  Cali- 
fornia State  Water  Commission  has,  in  each  field,  peg  models,  cross 
sections,  well  logs,  water  maps,  and  all  necessary  data  for  centralized 
study  of  each  field?  Do  the  fields  east  of  California  have  similar  faci- 
lities under  co-operative  control?  If  not,  then  why  should  not  the 
States  pass  legislation  similar  to  California?  Or  will  the  industry 
perform  the  task  as  a  voluntary  effort? 

For  over  four  years  the  conservation  of  oil  and  gas  has  been  under 
State  supervision  in  California. 

The  great  source  for  anxiety  in  California,  as  elsewhere,  is,  of  course, 
from  the  infiltration  of  water  flooding  productive  areas  and  reducing 
production.  In  speaking  of  the  activities  of  the  California  Department, 
R.  P.  McLaughlin,  the  State  Supervisor,  says  that  State  legislation 
was  the  outgrowth  of  a  demand  upon  the  part  of  oil  operators  for  some 
means  of  combating  damage  from  underground  water  which  was  flooding 
many  of  the  fields.  This  damage  has  been  greatly  reduced  by  the 
uniform  methods  of  well  drilling  which  have  followed  scientific  study 
and  state  supervision.  The  work  of  the  State  Supervisor  is  largely 
advisory  and  is  based  upon  the  detailed  study  of  underground  condi- 
tions, which,  besides  its  direct  aim  of  controlling  water,  has  led  to  the 
discovery  of  productive  formations,  which  had  previously  been  ignored. 

The  natural  gas  reservoir  in  the  Elk  Hills  field  has  furnished  wells 
making  over  one  hundred  million  cubic  feet  daily.  This  discovery  was 
directly  due  to  the  work  of  the  Department. 

In  the  Coyote  Hills  a  great  number  of  wells  were  actually  drilled 
through  an  upper  oil  zone  without  productiveness  being  recognized. 
The  Department  recommended  that  water  be  shut  off  above  the  zone, 
and  wells  bailed  dry  to  test.  The  result  has  been  several  wells  which 
flowed  at  the  rates  of  from  400  to  10,000  barrels  of  oil  per  day. 

In  the  Kern  River  field  one  well  in  a  group  of  eight  was  plugged, 
and  increased  the  total  daily  oil  production  from  135  barrels  to  207 
barrels,  and  reduced  the  water  production  from  1,758  barrels  to  121 
barrels. 


In  another  group  of  eleven  wells,  repair  work  reduced  the  daily 
water  production  from  15,927  barrels  to  240  barrels,  while  the  oil  pro- 
duction increased  from  25  to  59  barrels. 

Following  these  demonstrations  many  similar  repair  jobs  have  been 
carried  on  by  property  owners  without  an  initial  investigation  by  the 
Department. 

It  would  be  an  easy  matter  to  carry  the  discussion  on  into  the 
various  branches  of  the  industry.  Neither  time  nor  space  will  permit 
detailed  discussions,  however,  but,  speaking  in  broad  terms,  I  may  say 
that  the  Conservation  Bureau  of  the  Oil  Division  of  the  Fuel  Adminis- 
tration estimated  that  by  inspection,  supervision  and  co-operation,  the 
Bureau,  during  its  existence  of  less  than  a  year,  effected  a  total  conser- 
vation in  fuel  oil,  natural  gas  and  kindred  products  that,  translated 
into  money,  represented  approximately  $5,000,000.  Unbelievable  in- 
efficiency was  reported  by  the  inspectors,  and  as  a  result  of  the  activities 
of  the  Bureau  I  am  prepared  to  make  the  specific  charge  that  the 
consumption  of  fuel  oil,  natural  gas  and  gasoline  is  inexcusably  wasteful. 
The  petroleum  industry  has  only  indirect  control  over  consumption, 
but  over  production,  transportation,  refining  and  distribution  it  has  a 
very  direct  control.  Unless  efforts  looking  to  conservation  are  central- 
ized in  some  organization  such  as  the  American  Petroleum  Institute  the 
desired  ultimate  result  cannot  be  attained,  no  matter  what  the  activities 
of  the  individual  units  of  the  industry  may  be.  And  if  such  work  is 
undertaken  by  the  American  Petroleum  Institute,  men  properly  qualified 
for  the  work  must  be  employed  to  do  that  and  nothing  else. 

Upon  one  occasion  it  was  suggested  to  me  that  any  conservation  in 
consumption  means  the  lessened  sale  of  petroleum  products,  and  was 
therefore  inimical  to  the  interests  of  the  industry.  Carried  to  its 
logical  conclusion,  reasoning  of  that  sort  spells  Government  Control; 
for  unless  industry  is  sufficiently  alive  to  its  obligations,  as  trustee  for 
the  public,  the  public  will  find  ways  and  means  to  prove  that  industry 
has  just  that  obligation  resting  upon  it. 

More  and  more  it  is  being  recognized  that  great  industries  dealing 
in  the  basic  commodities  essential  to  the  industrial  life  of  the  nation 
owe  a  service  obligation  that  must  be  discharged.  The  service  rendered 
by  the  petroleum  industry  in  the  past  has  been  of  a  singularly  high  type. 
That  type  of  service  must  be  continued  in  the  future,  but,  because  of 
new  and  complex  problems  entering  into  the  situation,  its  continuity 
is  possible  only  through  Conservation  and  co-operation — neither  of 
which  can  be  successful  without  the  other. 

The  Bureau  of  Mines  is  on  record  as  believing  that  10  or  15  million 
barrels  of  gasoline  are  lost  each  year,  in  this  country,  through  inefficient 


storage  and  handling,  and  that  at  least  one-half  of  this  gould  be  saved. 
Can  the  industry  prove  that  this  statement  is  right  or  wrong?  And,  if 
right,  why  doesn't  the  industry  find  ways  and  means  of  correcting 
the  situation? 

The  Bureau  of  Mines  has  compiled  figures  showing  that  refinery 
losses  average  approximately  4  per  cent  of  the  material  run.  Can 
these  losses  be  reduced?  Is  there  any  joint  discussion  among  refinery 
superintendents?  Do  they  ever  meet  and  talk  things  over?  I  am 
aware  that  economic  pressure  is  the  greatest  incentive  to  Conservation, 
but  a  proper  understanding  of  the  responsibility  resting  upon  the  oil 
industry,  as  the  trustee  of  the  people  in  the  administration  of  a  wasting 
national  asset,  will,  I  think,  add  even  greater  efficiency  to  that  due 
solely  to  a  desire  for  increased  profits.  And  this  awakening  in  itself 
will  be  the  source  of  greater  company  profit  by  conserving  and  making 
available  material  that  would  otherwise  be  wasted,  without  profit  to 
anyone. 

In  this  connection  I  must  again  emphasize  the  need  for  greater 
co-operation  and  more  extensive  pooling  of  knowledge  on  the  part  of 
oil  refiners.  There  is  too  much  false  mystery  concerning  the  processes 
in  use  by  the  average  refinery.  The  industry  would  gain  if  there  were 
less  attempt  to  maintain  secrecy  about  processes  which  are  really  known 
to  all.  I  would  invite  your  attention  to  the  attainments  of  the  Auto- 
motive industry,  whose  engineers  for  many  years  have  been  accustomed 
to  come  together  in  annual  meetings  and  make  common  property  of 
their  advances.  The  units  of  an  industry  go  forward  or  fall  behind  in 
unison,  and  in  the  long  run  the  furtherence  of  technical  proficiency 
rather  than  its  restrictive  application  is  for  the  general  good. 

Burned  under  boilers,  fuel  oil  is  at  best  wastefully  consumed,  and 
at  worst  is  losing  in  every  barrel  20%  to  30%  of  lubricating  stocks  that 
we  shall  some  day  need,  and  need  badly.  Over  any  long  period  of  time 
its  future  use  in  this  manner  is  without  excuse  or  justification.  Employed 
as  a  fuel  in  the  Diesel  or  semi-Diesel  type  of  engine,  the  saving  amounts 
to  as  much  as  75%  of  the  oil  burned;  and  economic  pressure  will,  of 
course,  force  greater  and  greater  use  of  this  type  of  engine,  especially 
for  marine  work.  I  seriously  question  whether  the  marine  steam-engine 
is  not  today  obsolete.  Certainly  with  over  140,000  gross  tons  of  Diesel- 
equipped  shipping  now  under  construction  in  the  United  States,  and 
the  large  foreign  fleets  in  operation  or  building,  the  Diesel  type  is  no 
longer  experimental  and  must,  in  future,  I  think,  supersede  steam- 
driven  units  with  ever-increasing  rapidity,  because  of  absolutely  econo- 
mic reasons  if  for  no  other.  A  recent  report  of  Lloyds  indicates  that 
16.3%  of  the  world's  tonnage  is  now  employing  fuel  oil,  and  already 

10 


1.7%  of  the  world's  tonnage  is  converting  fuel  oil  into  power  by  means 
of  the  Diesel  type  of  internal  combustion  engine.  Since  the  United 
States  is  planning  a  great  expansion  in  foreign  trade  and  is  building 
a  substantial  merchant  marine,  we  will  ignore  a  most  potent  point  of 
superiority  if  we  neglect  the  significance  that  motor  ships  have  upon 
the  situation. 

The  growth  of  requirements  for  gasoline,  far  in  excess  of  production 
by  old  methods,  has  forced  a  diversion  of  fuel  oil  from  its  industrial 
role  into  the  rank  of  marine  and  motor  fuel.  Because  of  this  diversion, 
the  gas  industry  has  found  it  increasingly  more  difficult  to  obtain  its 
accustomed  quotas,  and  then  only  at  higher  prices. 

Is  the  industry  making  any  concerted  effort  to  meet  this  new  prob- 
lem? Or  is  the  individual  interest  given  entire  precedent  to  the  exclu- 
sion of  any  consideration  of  public  need? 

The  requirements  of  automotive  transportation,  particularly  truck 
and  tractor,  are  growing  so  rapidly  that  a  supply  of  motor  fuel  can  only 
be  assured  for  future  years  by  giving  the  utmost  attention  not  alone 
to  economy  of  operation,  but  also  to  the  more  difficult  problem  of 
adapting  the  engine  so  as  to  permit  the  maximum  increase  in  the  fuel 
supply.  The  problem  of  co-ordinating  engine  and  fuel  is  thought  by 
many  engineers  to  represent  one  of  the  most  important  issues  now 
occupying  the  field  of  automotive  transportation.  Is  the  co-operation 
between  the  automotive  industry  and  the  petroleum  industry  in  the 
solution  of  this  problem  effective?  Is  it  serious,  and  can  it  be  made 
still  more  satisfactory? 

In  the  past  I  have  frequently  referred  to  the  pivotal  importance 
of  lubricating  oils,  and  I  need  not  emphasize  to  this  audience  the  fact 
that  the  machinery  of  our  industrial  age  is  entirely  dependent  upon 
ample  supplies  of  mineral  lubricants.  There  is  wide  room  for  research 
not  only  in  the  production  of  these  oils,  but  in  the  use  of  lubricating 
oils  as  well.  It  has  been  estimated  that  in  the  United  States  needless 
losses  arising  from  imperfect  or  faulty  lubrication  run  to  as  much  as 
50%  of  the  power  generated.  Is  there  any  co-ordinated  effort  being 
made  to  improve  this  condition? 

I  should  be  remiss  in  my  review  if  I  did  not  call  to  your  attention 
the  means  of  conserving  petroleum  by  the  development  of  supplemen- 
tary resources.  The  usefulness  of  oil  is  so  great,  and  the  requirements 
for  oil  products  are  so  insatiable,  that  it  is  safe  to  say  that  the  production 
of  petroleum  cannot  keep  pace  with  the  needs  of  civilization.  Should 
we  double  the  output  this  coming  year  the  net  result  would  merely 
be  to  double  the  range  of  requirements  dependent  upon  petroleum. 
Irrespective  of  the  size  of  our  future  production,  therefore,  we  shall 

11 


face  a  demand  of  even  greater  proportions.  In  recognition  of  this 
condition,  and  as  insurance  for  continuity,  we  should  not  neglect,  in 
proper  time,  to  make  easy  the  way  for  our  resource  allies.  The  oil 
shale  industry,  the  coal  retorting  industry,  the  power  alcohol  industry, 
with  their  potentialities  and  their  limitations,  deserve  our  close  con- 
sideration. While  they  may  superficially  appear  as  competitors,  they 
are,  fundamentally,  our  allies.  When  the  time  is  ripe  I  believe  these 
supplemental  sources  of  supply  can  be  developed  by  the  petroleum 
industry  more  advantageously  than  by  any  other  agency. 

No  branch  of  industry  has  been  more  wasteful  in  the  past  or  needs 
greater  effort  toward  Conservation  than  the  natural  gas  industry. 
Judged  by  the  results  of  investigations  made  during  the  war  period  by 
the  Oil  Division  of  the  U.  S.  Fuel  Administration,  the  situation  is  tragic. 
I  might  better  say  pitiable,  or  perhaps  both  terms  should  be  used.  No 
more  fertile  field  exists  for  real  conservation;  none  more  urgently  re- 
quires it.  Production  reached  its  maximum  in  1917  with  a  marketed 
output  of  nearly  eight  hundred  billion  cubic  feet;  since  when  the  decline 
has  been  continuous  until  it  is  now  estimated  that  there  will  be  only 
six  hundred  and  fifty  billion  feet  produced  in  1920,  or  a  decline  of  nearly 
20%,  notwithstanding  the  increased  demand  due  to  normal  increase  of 
population  and  industry. 

It  was  estimated,  during  the  same  investigation,  that  more  gas  was 
lost  than  ever  reached  the  consumer,  and  that,  of  the  portion  passing 
meters,  80%  performed  no  useful  service,  owing  to  inadequate  or 
improper  appliances. 

As  I  speak  I  have  before  me  in  my  mind's  eye  a  photograph  of  a 
pile  of  natural  gas  mains,  torn  up  during  the  war  period.  Electrolysis 
and  rust  had  eaten  them  full  of  holes  to  an  unbelievable  extent,  and 
careful  measurement  by  the  Bureau  of  Standards,  before  tearing  them 
up,  showed  a  line  loss  of  40%. 

Man  with  all  his  skill  has  never  been  able  to  make  a  cornmercial  gas 
equal  in  quality  to  the  natural  gas  we  have  so  prodigally  wasted.  Be- 
cause of  its  seeming  abundance,  its  price  has  been  low — with  resultant 
waste.  No  saying  is  truer  than  that  *'we  do  not  value  the  thing  that 
costs  us  little  or  nothing."  Because  of  diminution  in  supply,  with 
consequent  necessity  for  increased  price,  it  is  obvious  that  the  use  of  the 
product  must  and  will  be  more  efficient  in  the  future,  but,  as  an  added 
incentive,  use  should  be  denied  to  those  who  do  not  consume  it  econo- 
mically; and  equally,  of  course,  companies  whose  lines  are  leaky  and 
whose  methods  are  wasteful  should  be  penalized  in  full  measure. 

It  is  the  function  of  our  public  service  bodies  to  see  that  rates  are 
such  as  to  permit  proper  maintenance;  given  which,  no  excuse  for 

12 


avoidable  losses  should  be  tolerated.  Lines  should  be  metered  at  intake 
and  outflow,  and  results  carefully  scrutinized;  devices  for  burning  the  gas 
should  be  examined,  and  only  those  of  proved  efficiency  permitted;  in 
short,  every  effort  should  be  put  forth  to  see  that  past  waste  be  elimi- 
nated and  that  our  remaining  supplies — admittedly  relatively  meager — 
are  conserved  to  the  greatest  possible  extent. 

I  have  been  told  more  than  once  that  my  faith  in  the  ability  of  the 
industry  to  govern  itself  is  misplaced;  that  the  individual  interest  was 
supreme  and  often  ran  counter  to  public  interest;  that  selfish  considera- 
tions precluded  the  success  of  my  highly  idealistic  and  impractical  belief; 
that  because  certain  very  necessary  results  had  been  accomplished  in 
war  time  it  did  not  at  all  follow  that  similar  results  could  be  expected 
or  accomplished  in  time  of  peace;  and  that,  some  day,  I  should  awaken 
and  find  myself  disillusioned. 

Notwithstanding  the  prophecies  of  disaster,  I  am  still  strong  in 
my  belief;  if  for  no  other  reason,  because  I  think  it  a  matter  of  industrial 
self-preservation.  The  underlying  fundamental  truth  seems  to  me 
absurdly  simple.  Either  the  industry  must,  through  self-government, 
prove  its  ability  to  meet  and  successfully  deal  with  the  economic  forces 
confronting  it,  or,  sooner  or  later,  those  forces  will  compel  recognition 
and  action  on  the  part  of  the  Government.  It  is  not  a  question  of  ignor- 
ing a  condition,  but  rather  of  choosing  the  course  to  be  followed.  For 
we  shall,  regardless  of  our  wishes,  be  forced  to  follow  some  road — either 
that  of  industrial  co-operation  and  conservation,  or  of  Government 
dictation. 

Government  aid  may  be  required.  When  it  is,  it  can  be  asked  for; 
but  the  task  is  emphatically  one  for  the  industry  itself  to  perform,  if  it 
is  to  be  done  efficiently  and  properly.  And  so  long  as  it  is  done  efficiently 
and  well,  there  is  neither  cause  nor  justification  for  governmental 
interference. 

Because  I  have  seen  the  tragic  inefficiency  and  waste  of  Govern- 
mental Washington  I  am  convinced  that  the  petroleum  industry  can 
most  efficiently  perform  its  service  through  self-government  and  regu- 
lation, asking  for  legislation  only  to  make  more  effective  rational  acti- 
vities. I  have  a  horror  of  Government  control  or  supervision,  save  in 
its  broadest  terms,  because  I  know  that  it  spells  less  efficiency  on  the 
part  of  the  petroleum  industry;  but  it  is  obvious  that  that  control 
will  be  exercised  if  we,  the  petroleum  industry,  fail  in  self-government. 

It  is,  I  think,  an  axiom  of  government  that  "best  governed  is  least 
governed";  but,  on  the  other  hand,  that  doctrine  can  only  be  successfully 
applied  when  the  citizens  en  masse  recognize  this  civic  responsibility 
and  bring  the  weight  of  public  opinion  to  bear  upon  those  recalcitrants 

18 


who  refuse  such  recognition.  Legislation,  if  you  will,  and  of  the  most 
drastic  character — but  not  until  the  industry  has  proved  itself  unfit  for 
the  accomplishment  of  its  task — and  only  then  for  those  who  have 
proved  their  unfitness. 

That  there  is  real  cause  for  anxiety  in  the  event  of  the  industry 
proving  unequal  to  the  task  can  be  shown  by  quoting  a  statement  in 
the  "New  York  Times"  of  November  6,  1920,  made  jointly  by  Senators 
Edge  and  Calder — both  Republicans,  and  both  inclined  to  be  conser- 
vative— in  which,  among  other  things,  they  say; 

"We  are  opposed  to  Government  regulation  as  a  policy,  but  the 
Government  must  assume  responsibility  for  its  people,  and  we  will 
recommend  a  bill  for  entire  control  of  the  industry,  just  as  far  as  possible 
under  the  Constitution,  unless  prices  are  materially  reduced  by  Decem- 
ber 6." 

This  was  said  of  the  coal  industry,  and  it  is  because  I  do  not  want 
any  similar  statement  made  regarding  the  petroleum  industry  that  I  am 
so  insistent  that  you  practice  co-operation  and  conservation.  The  pro- 
duction of  petroleum  is  a  form  of  mining;  it  deals  with  a  wasting  asset, 
and  you  are  therefore  obligated — both  on  the  score  of  public  service 
and  private  gain — to  utilize  that  asset  most  efficiently. 

We  must  make  it  our  task  to  present  to  the  public  the  problems  of 
the  industry,  truthfully  and  adequately,  to  the  end  that  we  may  retain 
that  confidence  and  co-operation  necessary  in  permitting  us  freedom 
of  action  in  the  performance  of  satisfactory  service.  And  in  so  doing 
we  shall  come  to  realize  that  our  responsibility  as  trustees  in  the  ad- 
ministration of  one  of  the  nation's  greatest  assets,  our  obligations  to  the 
public,  to  our  stockholders,  and  to  ourselves,  can  be  satisfactorily  and 
successfully  performed  only  by  the  practice  of  Co-operation  and  Con- 
servation, 


14 


